CHINESE financial institutions have indefinitely suspended
funding three big infrastructural projects totalling US$1,324 billion after
government raided and diverted US$10 million from an escrow account for the
Robert Mugabe International Airport expansion project, the Zimbabwe Independent
can reveal.
Official sources say the escrow account — where funds are
held in trust while two or more parties complete a transaction — was raided for
foreign currency, leaving the Chinese shocked about the breach of trust and
confidentiality.
The sources said the move has strained relations and
further complicated co-operation arrangements between the two countries.
Chinese companies and financial institutions are not happy with the country’s
deteriorating political risk and policy inconsistencies.
Chinese investors and financial institutions, including
China Eximbank, are also worried about currency and exchange rate volatility
which have affected projects they are bankrolling in Zimbabwe.
The affected infrastructural projects are the US$1,1
billion Hwange 7 and 8 refurbishment, US$153 million Robert Mugabe
International Airport expansion and the US$71 million NetOne expansion project,
which are at various stages of implementation. They were being bankrolled
through various loan facilities secured from the China Eximbank and other
financial institutions.
The seized funds, which were converted by government,
through the Reserve Bank of Zimbabwe (RBZ) into the local unit, were raided
from an account holding investment capital for the expansion of the airport at
the beginning of the year.
The project is being undertaken by Jiangsu International
and was being funded through a concessional loan facility from
It is envisaged that the expansion of the airport will
transform it into a modern facility, which will increase its capacity from
handling two million travellers to about six million annually.
According to terms and conditions of the US$153 million
deal for upgrading the country’s largest airport, the loan will run for 20
years, with a grace period of seven years at an interest rate of 2% per annum
and a 0,25% commitment fees per annum once off payment.
Despite negotiations and complaints from the Chinese
company and complaints by Chinese Embassy officials, authorities revealed the
government has not returned the US dollars, infuriating China Eximbank and
Chinese officials. Work on the project commenced last year and was due to be
completed over the next three years.
“Basically what happened is that the RBZ raided the escrow
account for the Airport project and that move destroyed confidence and trust.
There have been negotiations for the money to be returned but government is not
being honourable enough,” one official said. “The Chinese were patient, but
this happened at the beginning of the year and they have now run out of
patience. Chinese financial institutions have taken the decision to cease
funding the three projects.
“It’s a matter of principle, trust and confidence. How can
you trust a pick pocket with your money? If someone steals money from your
pocket, can you trust them with your money in future? Those are the questions
the Chinese are asking.”
Government officials said Chinese Embassy officials have
discussed the matter with Finance minister Mthuli Ncube, but no action has been
taken.
“The Chinese have now resorted to withdrawing their funding
as a last resort. It seems government does not know how serious the issue is
and there is risk that the country could lose projects worth more than US$1
billion the theft of US$10 million,” a government official said.
There were already questions over the US1,1 billion Hwange
7 and 8 expansion project.Zesa officials told Power and Energy Development
minister Fortune Chasi during a tour of Kariba Power Station that China
Eximbank was considering withdrawing funding for the Hwange project after the
escrow account for the project was also raided.
Zimbabwe Power Company, the generation arm of State power
utility Zesa, acting managing director Engineer Robson Chikuri said China
Eximbank had verbally expressed its displeasure about the situation.
Zesa was expecting the bank to register its misgivings in
writing, indicating the escalation of the gravity of its reservations.
The expansion of the Hwange plant, which is 22% complete,
is expected to add 600 megawatts to the national grid.
The project has created 3 000 jobs since commencement last
year and is set for completion in 2023. It is being implemented by Sinohydro,
one of the largest construction companies in the world.
The NetOne project is meant to expand the company’s mobile
telecommunications network through setting up and upgrading base stations
across the country.
The affected projects are among the several multi-billion
dollar sectoral infrastructural deals China lined up for Zimbabwe following
President Emmerson Mnangagwa’s visit to Beijing where he met Chinese leader Xi
Jinping last year.
Although the projects had been agreed during the late
former president Robert Mugabe’s era, Chinese financial institutions had not
released funds because of Zimbabwe’s failure to repay earlier loans.
China, however, made a special dispensation to release the
loans to Zimbabwe to assist the new government and also in line with the
elevations of relations from all-weather friends to strategic partners.
Despite the elevation of relations, Chinese financial
institutions remain worried by the economic conditions in Zimbabwe.
Shanghai Construction Group, for example, has complained
that it is failing to access hard currency as it constructs Zimbabwe’s new
parliament building through a US$100 million free grant from China-Aid.
Although the money is coming as hard currency, the company
is only allowed to withdraw local currency.
RBZ governor John Mangudya had not responded to questions
sent to him at the time of going to print. Finance ministry secretary George
Guvamatanga also did not respond to questions sent to him. He was not answering
his mobile phone.
The latest swoop by the central bank on private funds
follow disclosures by the Chamber of China Enterprises and Tian Ze Tobacco
Company general manager Yei Hai to the Independent on August 23 that the
reintroduction of the Zimbabwean dollar after government had scrapped the
multi-currency system was disrupting business operations.
“The re-introduction of the Zimbabwean dollar really
affected our operations. For us (Tian Ze) as an exporting company we bring
foreign currency into the country. When money comes in, it is changed into the
Zimbabwean dollar. If you do not use that money in time, it loses its value by
the day and this impacts on planning,” Hai said at the time.
‘The situation is worse for our members who are not
exporting. With the exchange rate going up, most companies suffer from workers
who are now demanding to be paid more. As a business, it is now difficult to
survive here in Zimbabwe.” Zimbabwe Independent
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